February 1, 2014

A DEFLATIONARY EPOCH:

Buffalo writer Steve Cichon dug up an old Radio Shack ad, offering a variety of what were then cutting-edge gadgets. There are 15 items listed on the page, and Cichon points out that all but two of them -- the exceptions are a radar detector and a set of speakers -- do jobs that can now be performed with a modern iPhone.

The other 13 items, including a desktop computer, a camcorder, a CD player and a mobile phone, have a combined price of $3,071.21. The unsubsidized price of an iPhone is $549. And, of course, your iPhone is superior to these devices in many respects. The VHS camcorder, for example, captured video at a quality vastly inferior to the crystal-clear 1080p video an iPhone can record. That $1,599 Tandy computer would have struggled to browse the Web of the 1990s, to say nothing of the sophisticated Web sites iPhones access today. The CD player only lets you carry a few albums worth of music at a time; an iPhone can hold thousands of songs. And of course, the iPhone fits in your pocket.

This example is important to remember in the debate over whether the government's official inflation figures understate or overstate inflation.